Breakout in McDonald’s Appears Imminent

by Sam Collins | October 16, 2012 1:12 am

Breakout in McDonald’s Appears Imminent

McDonald’s Corp. (NYSE:MCD[1]) — Shareholders of this fast food chain, which operates in more than 100 countries, have benefitted from its huge cash flow and its history of returning cash to stockholders through buybacks and dividend hikes.

This year, however, has not been kind to the stock price. It fell from a high of $102 to under $86 due to a modest trim in earnings from currency fluctuations and a weak European economy, which slowed earnings to an increase of just 4%, far below the company’s traditional gains. But earnings are expected to jump to $6.06 in 2013, from $5.48 in 2012, and to $6.62 in 2014, which would reestablish the company’s 10%-plus annual growth history.

Technically, MCD double-bottomed in August and has advanced to its 200-day moving average at $94. Upside volume is increasing, MACD issued a buy signal on Monday, and a breakout appears imminent. A close above $94 should result in a quick trade to over $100. And long-term buyers can expect a march to much higher levels.